What Are the Pros and Cons of Using My Cash Now?

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My Cash Now and other so-called "payday loan" providers, offer customers a small, short-term and unsecured loan in exchange for an interest rate that is much higher than other types of loans. They can provide short-term, emergency cash, but, according to the Federal Trade Commission, the U.S. federal government's consumer protection agency, at a very high cost.

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A consumer who needs a payday loan writes a check to the lender, with the guarantee that it is not deposited until the next payday. Then, the lender deposits the check, which is usually for a much higher amount of money than the amount loaned, on the prearranged date. Depending on how they are calculated, these loans carry much higher interest rates than credit cards, often carrying an annual percentage rate of over 300 percent, compared to single- or double-digit rates for other forms of credit.

The FTC recommends that consumers do everything they can to avoid payday loans. Alternatives include small loans from a credit union, asking for additional time from existing creditors, arranging for overdraft protection on a checking account, and budgeting to avoid the necessity of payday loans. Payday and other short-term loans are illegal in 14 states and the District of Columbia, while the other 36 states allow some form of the practice.